The insurer restructured its personal pension last October to take advantage of A-day, writing all new personal pensions policies under one scheme and allowing “seamless” movements between products.

Unfortunately it seems not too many customers have been prepared to pay up front for the privilege.

Norwich Union director of pensions Angela MacDonald admits NU’s individual personal pension has been “out of favour” and gently declining. She says sales have been hampered by initial charges and advisers not being able to differentiate between its all-singing-all-dancing proposition and its stakeholder products. MacDonald says this problem has occurred across the industry with stakeholder products failing to live up to their low cost, low advice billing and becoming interchangeable with other pension offerings.

The latest changes, which include scrapping initial commissions, tightening up claw back terms and doubling minimum payments for regular and single payments. are designed to break away from transient, stakeholder-type customers and lure more sustainable, high premium business.

But while the changes look perfectly understandable, and the removal of initial charges has been positively welcomed, they have raised afew eyebrows.

MacDonald insists increasing the potential clawback period from 36 to 48 months is a pre-emptive measure and not a response to NU losing pensions business. But the insurer’s first half results have already indicated it is having some difficulty writing sustainable business, with an increase in its pensions lapse rate.

While he understands NU’s decision to tighten up clawbacks, Informed Choice managing director Nick Bamford says it could be damaging for IFAs reliant on commission. But there is no doubt it will help prevent less scrupulous IFAs from shunting customers to NU for the wrong reasons.

Inevitably the insurer’s strategy to offer enhanced commission from 25 September 2006 to 31st March 2007 has also prompted criticism it is buying market share.

MacDonald insists this is not part of its long term strategy but is candid about the fact that improving commission terms is as effective way as any of getting its scheme noticed again. She also points out that NU’s attempt to build costs into the front end of the product through initial charges has put off both customers and advisers. Perhaps it is no wonder that the insurer has fallen back on more traditional methods of winning business and has spread the costs through the lifecycle of the product.

Following hot on the heels of Fidelity, the ABI released details of its plans for the NPSS Personal Accounts scheme.

In its response to the Pensions White Paper, due next week, the ABI pledged its unbridled support for Personal Accounts.

But having rejected the Pension Commission’s proposed 0.3 charge cap and mooted a 0.6 per cent charge cap as more realistic, the ABI has neatly sidestepped the Government’s challenge to set any such restriction on remuneration.

The ABI says that competition among providers involved in the scheme will ensure charges are maintained at a reasonable level but an independent economic regulator should step in to impose a cap if necessary.

Scottish Life head of communications Alasdair Buchanan believes the absence of a charge cap may well represent too much of an about turn for the Government to consider.

Cazalet Consulting principal Ned Cazalet says the concept of competing providers clamouring for business is the polar opposite of the cheap, single entry model the Pensions Commission had in mind.

Cazalet also questions why the ABI is showing such enthusiasm for a scheme which will be just as unprofitable for its members, if not more so, than stakeholder products.

ABI spokesman Jon French says there is no comparison to stakeholder and that auto-enrolment and mandatory employer contributions will make Personal Accounts a tenable and profitable vehicle for manyproduct providers.

Buchanan is unconvinced: “Competition in stakeholder has driven huge capital losses at many life companies and I don’t see why personal accounts will be any different.”

Cazalet puts in more vividly: “If you want to blow money down the drain you can go for the drip, drip approach as with NPSS, or go to the races, back some losers and drink champagne. I know which one I’d prefer.”

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